Three roles required of currencies
Not only cryptocurrencies, but also general fiat currencies such as dollars and yolks function as currencies because they fulfill the three elements of currency.
In order to function as a currency, it must fulfill the following three roles: a means of value exchange, a measure of value, and a store of value.
Means of exchange of value
Recently, more and more stores are allowing customers to purchase products with cryptocurrencies, especially Bitcoin.
Therefore, it can be said that the "means of value exchange" has been established.
Measure of Value
Being able to purchase a product means being able to show the value of that product.
For example, if you pay 0.01 BTC to buy a $100 bottle of wine, you can show that the wine is worth 0.01 BTC.
Store of Value
Cryptocurrencies are also much in demand as an investment.
As a result, most cryptocurrencies, including Bitcoin and Ethereum, have significant volatility.
When volatility is high, it is easy for a $100 bottle of wine to cost 0.01 BTC today, but 0.05 BTC tomorrow.
This is not a good way to store value.
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A New Mechanism to Solve the Problem of Cryptocurrency
Cryptocurrencies have a great advantage over fiat currencies in that they are programmable.
Programmable means that it can be programmed.
As "means of communication" and "transportation" have become programmable, useful tools such as e-mail and ride-sharing have been born.
Cryptocurrency is a new tool that has made it possible to program "money".
Here, the question may arise, "Why not electronic money or credit cards? is a question that is likely to come up.
In the context of cashless, they are classified as the same, but cryptocurrency is a system that realizes digital currency without a specific administrator.
By eliminating a specific administrator from the management of money, we can enjoy benefits such as the ability to transfer money on a dollar-for-dollar basis and protect our privacy.
It is also, above all, a useful tool for people, mostly in developing countries, who do not have access to financial services.
For these reasons, there are many advantages to cryptocurrencies becoming popular as currencies.
However, in order for cryptocurrency to play a role as a currency, it is necessary to realize the "store of value.
This is why a new cryptocurrency called "stablecoin" is being developed.
In the next and subsequent lessons, we will focus on this stablecoin and learn about DeFi, a next-generation financial system that solves not only the problems of cryptocurrencies but also those of fiat currencies.
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